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It's impossible to overstate the risk of fraud to companies and consumers, especially as the eCommerce and digital wallet industries experience tremendous growth. In 2020, nearly 50% of companies that participated in PwC's Global Economic Crime and Fraud Survey reported that they'd dealt with fraud in the last two years. The total cost of this fraud was estimated to be around $42 billion.
These numbers demonstrate that fraud prevention is extremely important, but companies must consider the cost to the consumer when they implement fraud prevention systems. What often happens is that these efforts fail to strike a balance between stopping fraudulent transactions, and providing a great customer experience.
They are either too stringent, resulting in headaches and obstacles for the consumer, or too lenient, giving fraudsters easy access to defraud the company. If you want to learn more about how to balance the two, read on.
Whether you're shopping online or in a physical retail store, you don't want to wait around for your card to be approved. Consumers expect lightning-fast processing times, and if your business isn't able to provide that it's very likely they'll go somewhere else to purchase the same products.
In addition, decisions need to be accurate. If you've ever experienced a credit or debit card getting declined while traveling or making a large purchase, you know how irritating it can be. Not only may consumers be embarrassed, but they're also inconvenienced. If they only have one card with them, for example, you've put them in a precarious situation with a false decline that will inhibit them from completing a purchase.
The same applies to online banking, such as applications for loans or credit accounts. People want decisions in seconds, not a notice to call a phone number for the decision or a letter that will be mailed within several business days. Companies need to invest in fraud detection solutions that can provide transaction approval decisions quickly, but also keep out fraudulent orders that will result in a chargeback and lost inventory.
The prevailing wisdom surrounding fraud prevention is that you have to choose to optimize your website to stop fraud, or provide a great customer experience.
While this may have been the case several years ago, modern machine learning technology offers a better solution for merchants that can simultaneously stop fraud attacks while offering a seamless shopping experience for customers. We're now able to cross-reference millions of data points to establish an accurate risk score for each transaction, all in a matter of seconds.
Modern fraud solutions are capable of utilizing customer behavioral data, transaction history, biometric information, and much more to help eliminate false positives and improve the accuracy of fraud detection.
Trying to find the perfect balance between fraud prevention and providing a strong customer experience is a tall order. When businesses experience high numbers of fraudulent transactions, they often pass those costs on to the consumer. At the same time, when they try to stop fraudulent orders from being approved, it often inconveniences the consumer through false declines and extensive identity verification steps.
Vesta can help you alleviate this issue. Our solution for fighting fraud attacks involves highly accurate risk scoring that merchants can use to inform the approval of new transactions - all based on proprietary machine learning models.
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